by phil - November 2nd, 2013 7:35 am
Now things get interesting!
We made a good bottom call in late August and, in Part 1 of our Trade Review, we had 46 trade ideas in two weeks (the last week of Aug and the first week of Sept) and 36 of them (78%) were winners. I predicted at the close of that post that it was not very likely we'd repeat that in Part 2 and now we'll see how things went during 3 weeks where the Dow went from 14,900 to 15,700 and back to 15,200.
I never know how these things will go until I do the reveiw so this is exciting for me. These are the trades we don't track in our virtual portfolios (which are highlighted daily in our Member Chat Room) so it's a bit arbitrary to pick a certain day to see how they are doing but, as I always say during these reviews, if you use good stop and scaling disciplines, you only have to be right half the time to do very, very well.
We left on on Friday, Sept 6th with "Non-Farm Friday – It's Next Week that Matters" and we had one of our losers that day, shorting oil at $109.50 (/CL). Too bad we didn't stick with that one, right? That's OK, there were plenty more… We also had a bullish play on TSLA, of all things, the Jan $130/160 bull call spread – but that was one of many covers we used along the way up to protect our longer, short positions.
As you can see from Dave Fry's SPY chart, we went nowhere on moderate, churning volume and that's no surprise actually when you have a look at this very helpful summary from theWSJ (via Barry) that summarizes our 4-year recovery in the economy:
by phil - October 13th, 2013 7:56 am
What a wild month!
Things went so crazy at the end of September that it's already October 13th and I'm just getting to the September review. Our August Review (Part 2) was done on 9/22 but part one but Part 1 of August was completed on September 1st, when the market was at the low of this cycle. We called the August action almost perfectly and, out of 106 trade ideas for the month, 86 (81%) were winners – an incredible percentage I don't expect we repeated in crazy September.
We don't track our virtual portfolio trades in these reviews – this is for all the trades we don't track – which is most of them – as it simply wouldn't be practical to track every trade idea (which are highlighted daily in our Member Chat Room) we have for you at PSW! Of coruse, this is an arbitrary point in time and some trades could have had better (or worse) exits in between – we're not doing this to keep score, just to get an idea of what worked and what didn't in the past month so, hopefully, we can make better decisions this month.
We left off on Friday, August 23rd and we were still bearish. It's a good thing, too as it turns out we dropped like a rock the next week! My note in the Friday morning post oulined our attitude into the weekend as I said: "If the news-flow changes (and it hasn't as of our morning review), we'll be thrilled to get more bullish but, at the moment – I'm sorry to have to keep being negative." We were looking to complete our 5% Rule™ pullbacks before there was a turn and we'd already begun to do a little bottom-fishing – but let's not get ahead of ourselves!
The Dow couldn't even put a good day together on Friday and finished off it's third down week in a row failing to take back the 200 dma at 15,100 while the S&P tested theirs at 1,635 with AAPL and MSFT giving the S&P and Nasdaq most of
by phil - September 22nd, 2013 6:35 am
We completed part one of this review on September 1st.
Now it's the 22nd, 3 weeks later and we've given our late August picks enough time to mature (like fine wines) and now we'll uncork them and see how they came out! The last day we reviewed was August 9th and we had begun shorting Russell Futures (/TF) at 1,050 and they were up $2,800 at the time of the review (9/1) but, since then, the market has recovered – A LOT – and the Russell is back to 1,069.
Hence the transient nature of any trade reviews – they work until they don't and they don't work until they do. The real trick is learning to take a profit – when and if they come along. In the first 10 trading days of August, we had 50 trade ideas that were NOT part of one of our virtual portfolios and 42 (84%) of them were winners as of Sept 1st. As you can see from the IWM chart above, the end of August was a choppy mess. We'll see how we did on those picks but it's hard to imagine such a strong average in that kind of chop.
From a Fundamental perspective – our expectations are higher because the market is higher and we have to look at this incoming data while asking ourselves the question: "Is this data good enough to justify all-time market highs?" Of course we know the market is "juicing" on Economic Steriods – that's not the point because it's not "illegal" and they're not going to have to stop using stimulus - but all-time highs are the big leagues. They are the playoffs, in fact, and now they have to be turning in performances that are the best of the best or else the fans (investors) can turn on the markets very quickly!
by phil - September 1st, 2013 5:58 pm
That about sums up our August as the indexes dropped all month long – down 800 points on the Dow (5%) and 80 points on the S&P (5%) and etc., etc… As long-term investors, we know we're going to get a little wet when the market turns down – the trick is to stay in the boat and be ready to ride the next profitable wave.
As I reminded readers on Friday, I never thought the summer would be worth playing in the first place – calling for our Members to cash out and taking a nice summer vacation way back in May. Many people took my advice and we've had a pretty quiet summer in chat but now it's time to go back to work – hopefully at the bottom of a bigger sell-off than the 5% we've had so far. The short story of the Summer is that we fell 5% into the end of June, gained 5% in July and fell 5% in August so here we are, back where we ended May.
That then, had barely any net effect on our long-term positions and, short-term, we were 97 right, 20 wrong and 3 even on our July Trade Ideas (see July Trade Review Part One and Part Two) but we've had little luck with the trade ideas we put in the Short-Term Portfolio, which is currently down a virtual $25,942 but, of course, our Long-Term Portfolio gained back $150,000 over the same time period – so, as a pair, they're actually doing exactly what they are supposed to do (offset each other).
We don't track our virtual portfolio trades in these reviews – this is for all the trades we don't track – which is most of them, of course. Of coruse, this is an arbitrary point in time and some trades could have had better (or worse) exits in between – we're not doing this to keep score, just to get an idea of what worked and what didn't in the past month so, hopefully, we can make better decisions this month.
by phil - August 18th, 2013 11:29 am
Now to wrap up July.
We had a great start to the month (see Part 1) with 42 trade ideas and only 2 that didn't work but, ahead of the review, I doubt we did so well in the last few weeks as the extent of the run-up took us by surprise. Let's see how the rest of July played out:
What's happening is the Corporations have gotten ruthlessly efficient at scooping up the profits as they move operations to countries where they can pay the least and pollute the most – shifting those costs to future generations while the American sheeple head off to Wal-Mart and buy items that ultimately cost them more jobs and even more money over the long-haul.
- LTP and STP trades were made but a watch and wait day otherwise.
July 9: Testy Tuesday – NYSE 9,300 or Bust!
The NYSE gives us a clearer picture of the market and we need to take it's lagging performance very seriously but, on the other hand – we cannot ignore the glory that is Russell 1,010 either. The Russell (see Dave Fry's chart) is another broad index of 2,000 small-cap companies (under $2.6Bn, over $130M) and they add up to just $1.9Tn – much easier to push around!
But, faked or no, we have to play the cards we're dealt and this is day two of Russell 1,000+ and now we have 3 of our 5 Must Hold lines green on the Big Chart, which means we need to get more bullish. Both the Dow and the NYSE have a very long
by phil - August 3rd, 2013 4:54 pm
What a crazy month July has been.
Now that it's over, we've clearly gotten very bearish – even pressing our bearish bets into Friday's rally. How did this happen to us? Why do we hate the rally?
Well, for one thing, we were good little Stock Market timers and we "sold in May" – when the market topped out near the end of the month I called for cashing out bullish positions but, of course, we're still here – so we still make our daily picks.
June was choppy but more or less a downhill event. By the end of June, we were flipping bullish again and a lot of the reason we've been getting so bearish at the top of the July rally is that we have all these bullish late June/early July positions we need to protect. As a rule of thumb, you should always be putting 1/4-1/3 of your upside profits into downside hedges – that's just good hedging.
From time to time it's good to step back and take a big-picture view of how the market is doing and how you've been doing following it – it helps you see (hopefully) if you are getting certain things wrong or right. Also, it's important to remind our new Members that our Short-Term Portfolio is just that, a portfolio of SHORT-TERM positions used to counterbalance the longer-term bets that dominate the rest of our posts and chat.
There are, perhaps, a dozen Short Term Portfolio positions while there were over 100 picks for the month. Our short-term positions are directional GUESSES while our longer-term picks are for INVESTING – it's VERY important not to get the two confused….
I did a mini-review on June 21st (Friday) and noted in that post that we had flipped more bullish on that sell-off because we were expecting the bounce. In that mornings post I noted we had flipped long on DIA, GLD and TLT and our long DIA trade idea was:
Now I like the DIA Quarterly $148/150 bull call spread for 0.80, 30 of those in the STP
by phil - November 25th, 2012 3:42 pm
In uncertain markets, dividends can give you a critical investing edge.
As you can see from the chart on the left, just mindlessly investing in dividend-paying stocks can give you more than a 2:1 annual advantage in your investments and that adds up to quite a difference over time.
Of course, here at PSW, we teach the art of selling options premiums – something that turns virtually any stock into a "dividend" payer. For example, MSFT is only a small, 3.3% dividend-payer but a fairly solid cash-machine of a stock that we don't feel is likely to go bankrupt overnight so it makes for a nice safe staple in a long-term virtual portfolio. But MSFT is also a very poorly-run company that hasn't grown in 20 years but we can make it a much more interesting stock by simply selling covered calls.
For example, we buy MSFT for $27.70 and we sell the Jan $27 calls for $1.28. This lowers our effective basis to $26.42 and selling the call puts us in no special danger – we are simply agreeing to sell MSFT for $27 on expiration day in January (the 18th). Should the stock be called away from us, we make a .56 profit or 2.1% of our net $26.42 cash investment in just 54 days. That works out to a 14.2% annualized ROI and, even if we get called away, we can simply buy the stock again and again and sell calls every month. Of course, you can optimize all this with timing and we favor stocks that are on sale – this is just a very simple example of how our most basic options strategy can drastically boost your annual returns on any stock in your portfolio.
Let's say you don't want to mess around with MSFT every month. You can simply sell the 2015 $28s for $3.35 that drops your net entry from $27.70 to $24.35 and getting called away at $28 would be a profit of 14.9% over 26 months PLUS you would be getting your .92 annual dividend so let's call it $1.84 more for a total profit (if MSFT holds $28) of $5.49 or 22.5% – 1% a month certainly beats what the banks are offering these days! Not as sexy as the 17.5% annual ROI you make by working the trade every month (with the dividend), but you do get a built-in cushion that…